It is significant that the overall index for private homes eased only a marginal -0.1 per cent in 2Q17, an improvement from the -0.3 per cent posted during the flash estimates and also the smallest decline over fifteen quarters. It is an indication that the index is closer to the bottom. Improvements are seen in all the sub-indices as tabulated below:

1Q17

Flash Estimates 2Q17

Actual 2Q17

All Residential

-0.4

-0.3

-0.1

Landed property

-1.8

-0.4

-0.3

Non-landed property

0.0

-0.3

-0.1

CCR

-0.4

-0.9

-0.5

RCR

+0.3

+0.5

+0.6

OCR

0.1

-0.4

-0.3​

Source: URA/JLL Research

The data shows that overall, prices are moderating further although the performances remain patchy, with the landed index decline moderating significantly, the RCR index continued to rise for another quarter while the indices for CCR and OCR softened slightly.

Strongest transaction volume in four years

In 2Q17, the total number of private homes sold in both the primary and secondary markets was 6,905 units, the highest quarterly sales since 2Q13 when 6,945 units were transacted before the TDSR was imposed. In the first half of 2017, the transaction volume in both the primary and secondary markets was 12,107 units, 63.7 per cent higher than in the first half of 2016. Driven by the perception that the market is close to the bottom, as well as prices having fallen to more attractive levels, buyers have been flocking back to the market. This trend is expected to continue into the second half of the year with demand remaining upbeat as buyers try to catch the market before it turns around. Our forecast for the full year’s total transaction volume is 23,000 to 25,000 units, surpassing the 22,719 units in 2013.

Rental decline moderating

The overall rental index eased -0.2 per cent in 2Q17 following a -0.9 per cent drop in 1Q17 and is also the smallest quarterly decline over 15 quarters of downtrend. Most of the sub-indices also display the same trend so the data points towards a moderation in rental decline. The peak of the supply from new completions was in 2016 when 20,803 units were completed and vacancy rates hit a high of 8.9 per cent in the middle of the year. New completions have moderated to 8,134 units in the first half of 2017 with vacancy registering a lower 8.1 per cent as at 2Q17. Another 8,410 units are expected to be completed in 2H17 (based on URA data), followed by 8,417 units in 2018. As the leasing market is still over-supplied, a turnaround is expected only in 2018, when supply moderates significantly and expected economic improvement lifts demand.

Unsold stock at more manageable level

The stock of unsold private homes comprising of both completed and uncompleted private residential units unsold has declined to 16,929 as at 2Q17, from the most recent high of 40,430 at end 2011. Of significance is the unsold stock of 5,956 units in OCR which appears to be a low inventory level compared to recent take up rate (comprising of completed and uncompleted private residential units sold). The take up in 1H17 in the OCR primary market was 3,732 units. Assuming a doubling to 7,464 units for the full year, this figure exceeds the unsold stock of 5,956 units. This phenomenon could contribute to prices stabilizing sooner leading to an eventual turn around.

Office

Ms Tay Huey Ying, Head of Research and Consultancy, Singapore

郑惠匀, 研究与咨询部主管 (新加坡)

Improving business sentiment lends hand to office demand

Whilst there remains lingering economical and geopolitical headwinds, a brighter economic prospects for 2017 have lifted business sentiment and optimism. An increasing number of corporations are now observed to be more prepared to reconsider their real estate plans and this has lent support to leasing activity in 2Q17, particularly at the higher end of the market.

This is reflected in URA’s latest real estate statistics which showed that the Downtown Core planning area where the bulk of Singapore’s prime and new office space is located was one of the two areas that saw an expansion in net absorption in 2Q17. The 30,000 sqm of expansion in net absorption recorded for the Downtown Core planning area in 2Q17 was the strongest showing for the area since the 53,000 sqm recorded in 3Q12.

A more active leasing market has also contributed to a sharp moderation in office rental declines in 2Q17. Specifically, the rental index for office space in the Central Region eased 1.1 per cent q-o-q in 2Q17, slower than the 3.4 per cent q-o-q correction in 1Q17. The slowing rental declines had come about in spite of the island-wide occupancy rate of office space dipping to a six-year low of 87.6 per cent in 2Q17. This anomaly is likely the result of the rising trend of occupiers committing to space ahead of their lease expiry. While occupancy might be low, a healthy amount of the vacant space have actually found occupiers, some of whom would only move in sometime in the future given that they have pre-committed to space ahead of their lease expiry. The staggered return of space to the market has effectively reduced the amount of office space available for lease in the market, and mitigated the downward pressure on rents.

This is particularly the case for Grade A office space in the CBD. JLL’s research showed that Grade A CBD office rents have bottomed and posted its first uptick in two years. This was led by a 1.3 per cent q-o-q gain in the average monthly gross rents of office space in Marina Bay submarket.

JLL forecasts that Grade A rents could continue to firm in 2H17, ending the year with an overall gain of up to three per cent for CBD as a whole and three to five percent for the Marina Bay submarket. However, rents for the rest of the island could continue to come under downward pressure on the back of competition for tenants to backfill space vacated by occupiers upgrading to newer and better premises in the CBD.

Retail

Ms Tay Huey Ying, Head of Research and Consultancy, Singapore

郑惠匀, 研究与咨询部主管 (新加坡)

Suburban malls bring cheer

URA’s latest real estate statistics showed that Singapore’s retail property market continued to be dragged down by the ongoing restructuring taking place in the retail industry. Retail rents continued to ease, for the tenth straight quarter, by 1.2 per cent q-o-q in the Central Region in 2Q17. This comes as demand for retail space remained in a contraction mode, given that retailers and food & beverage operators stayed largely cautious and showed a preference for overseas over local expansions in 2Q17.

URA’s statistics showed that some 44,000 sqm of retail space were given up in 1H17. The Outside Central Region (OCR) stood out as the only region that bucked the demand contraction trend. URA’s statistics showed that net absorption in OCR expanded by 15,000 sqm in 1H17, exceeding the net new supply of 13,000 sqm. This is in line with the continually strong interest for retail space in suburban malls, particularly those strategically located within transportation nodes, proving their resilient nature despite the persistently weak consumer sentiments.

Suburban malls continue to attract new F&B operators. Additionally, during the quarter, we also observed the expansion in beauty trade types such as Innisfree in Bedok Mall, Sulwhasoo in Westgate, Skin Inc in Vivocity and Yakson in The Star Vista. Retail space in the suburban malls were sought not only for the benefit of their loyal customers, but also due to the lure and potential of having an immediate ready shopper catchment in the form of the residents living in the vicinity.

Moving forward, landlords and retailers are foreseen to continue to work closely together and take progressive steps towards becoming “phygital” to harness the mutual benefit and role that malls could potentially play in complementing the e-commerce chain. For retailers, it means having a convenient physical space situated either in close proximity to housing estates or transport links to conduct the click-and-collect format for their customers. This could concurrently drive foot traffic and sales to the mall. The potential for stronger occupier demand in the future could support the gradual tapering of rental declines.